Comprehensive Electricity Tax Relief for the Manufacturing Sector

With a cabinet decision in mid-July 2024, the legislature permanently established the electricity tax reduction for the manufacturing sector at the European minimum rate of 0.50 euros per megawatt-hour (MWh). In doing so, the federal government is swiftly implementing the permanent extension of the electricity tax relief under Section 9b of the Electricity Tax Act (StromStG)—announced as part of the federal government’s growth initiative on July 5, 2024—which was originally set to expire at the end of 2025.

The permanent reduction for eligible companies represents a relief for the economy amounting to 3.25 billion euros per year. The BDI supports this provision, as it offers the planning certainty that has long been called for and represents a sensible successor to the electricity tax peak compensation scheme, which has already been abolished.

Important adjustments for the development of electric mobility

The Act on Modernization and Reducing Bureaucracy also contains the following key provisions:

• Introduction of a “deemed end-user” provision for charging points in the field of electric mobility to avoid case-by-case reviews of complex business models “within the charging station”
• Clear guidelines for bidirectional charging of electric vehicles, ensuring that electric vehicle users are not classified as utilities or liable for taxes, provided that no electricity is fed from the private customer’s system into the regulated grid
• A technology-neutral redefinition of electricity storage systems to prevent multiple taxation of electricity fed into and withdrawn from the grid
• Elimination of the so-called “system grouping” requirement for decentralized electricity generation, in conjunction with the introduction of a uniform definition of a power generation system
• Introduction of a mandatory online application process for tax relief under Section 9b of the Electricity Tax Act (StromStG), which will enable the power-generating industry to file applications more easily starting in 2025 and, for the first time, allow for largely automated processing of applications
• Alignment with EU legal requirements, which provide for the general exemption of all energy products used for electricity generation
• Reduction of notification and reporting requirements, for example in the area of tenant electricity arrangements

The BDI welcomes the new regulations on e-mobility and electricity storage systems. With these measures, the legislature is responding to long-standing calls to eliminate legal uncertainty and double taxation in the development of business models for expanding the charging infrastructure.

Main point of criticism: Increased bureaucracy instead of reduced bureaucracy

However, there are also critical voices regarding the draft bill. Contrary to what was announced, the new regulations are associated with a significant increase in bureaucracy. The reduction in bureaucracy announced by lawmakers is, in many cases, a simplification only from the administration’s perspective. This is because companies must generally comply with the requirements, even if documents and evidence are merely kept on file or reporting obligations only apply once a certain threshold is reached.

The main points of criticism include, in particular:

• The future exclusion of biomass from the definition of electricity from renewable energy sources under Section 2(7) of the Draft Electricity Tax Act (StromStG-E), despite its inclusion in the Renewable Energy Directive (RED III)
• Unclear regulations regarding electricity tax exemptions for the operation of electricity storage facilities with respect to pumped-storage power plants (Section 5(4) of the draft Electricity Tax Act)
• Increased bureaucracy resulting from the distinction between conversion and distribution losses in useful energy, which is limited to businesses (Section 9b(1b) of the draft Electricity Tax Act), leading to a disadvantage for district heating for households
• Additional bureaucratic burden due to new regulations on the calculation of advance payments (Section 8(6) of the Draft Electricity Tax Act), for the accounting treatment of electricity and energy tax transactions in tax accounts in the general ledger (Section 4(3), sentence 2 et seq., of the Draft Electricity Tax Regulation (StromStV-E)), as well as for volume determination (Section 11a(1) of the Draft Electricity Tax Regulation (StromStV))

In addition, there is concern that companies may also fall under the new reporting requirements even though they are not “true” utilities, as the text of the ordinance lacks a clear definition of which utilities are subject to reporting.

Insufficient legislative amendments to reduce the bureaucratic burden

Although the Federal Ministry of Finance (BMF) has responded to criticism regarding increased bureaucracy by providing additional guidance on wording, the switch from quarterly to semiannual calculation of advance payments does not provide much relief. Companies must still establish new calculation structures. The legislature has made only minor changes to the heavily criticized interference in utilities’ accounting systems resulting from the requirement for a reconcilable tax account. The law still requires that tax accounts be maintained in the general ledger to reconcile the reported electricity tax, including a posting freeze in the event of differing fiscal years.

In the upcoming parliamentary deliberations, the BDI will continue to advocate for a reduction in bureaucratic burdens. According to the current schedule, the law is to be passed by the end of the year and take effect at the beginning of 2025.